Archive for the ‘Retirement’ Category
Getting in early by investing in Nicaragua real estate
Wednesday, August 5th, 2009Critical to any successful real estate investment is the question of timing. Ideally, you want to get in early, before the rest of the world catches on to a new purchasing destination. Ten or fifteen years ago, you could describe Costa Rica or Belize as an ‘early-in’ investment destination. Today they welcome millions of people from all corners of the earth and property values have risen significantly over the years. Right now, many commentators are calling Nicaragua the ‘early in’ investment destination for the region, set to follow a similar growth trend as Costa Rica or Belize.
Comparison shopping
The key indicator to look at to determine where a market lies along a development curve is the cost of property. Problem is, it can be hard to get hold of comparative market statistics in Central America, particularly in areas where there is no functioning MLS.
So we turned to Reveal Real Estate, a market research organization focusing on international real estate in Central America. They have aggregated listing prices from real estate developments and master planned communities in Nicaragua, Belize, Costa Rica and Panama and put this information online. The chart below shows their analysis of median price per square foot for houses in 2008 across the four countries.
Nicaragua emerges as the lowest cost property destination across all categories, and second cheapest (after Panama) for ocean view houses. The 2009 data, which has just been released for Nicaragua and Panama real estate, backs this up with Nicaragua emerging as a cheaper investment destination across all property types. Costa Rica real estate and Belize property data will soon be released so we’ll run the comparison when it is available.
And it’s not just property values that are paving the way for early-in property investors, Nicaragua has the lowest cost of living in Central America. (Calculated using implied Purchasing Power Parity (PPP) conversion rate from the IMF.)
It’s a buyers market in Nicaragua
Right now it’s a buyers market in Nicaragua. The country is not immune to the global economic crisis. Developers are offering incentives and there have been some price reductions. But what’s clear is that Nicaragua is not experiencing the double digit declines we’re accustomed to seeing in headlines across the globe.
As noted by Reveal Real Estate, the key reason for this is the low levels of lender-mediated activity in the Nicaragua property market. With most property purchases being made in cash, foreclosures are very rare.
A second factor is the emergence of a new type of ‘lifestyle investor.’ These are buyers who are seeing their chances of retiring in, say, Florida unwind but they’re not ready to give up on the lifestyle they had planned for their retirement. So they’re looking at countries like Nicaragua where the real estate is cheaper and, crucially, the cost of living more affordable. And they’re getting in early by investing in Nicaragua real estate.
New retirement incentives are good for Nicaragua real estate investors
Tuesday, June 30th, 2009Nicaragua is rolling out the welcome mat for foreigners to retire and become resident in the country. The changes to the residency and retirement laws, announced in June by the Tourism Institute, increase the tax exemptions and benefits.
The timing of this new law makes sense given the gloomy economic climate worldwide. The new sales tax exemption on home construction materials is directed firmly at Nicaragua real estate investors, and will encourage more to start building.
All in all, this new suite of laws make Nicaragua’s retirement program one of the most benefit-laden in the region.
Will Nicaragua real estate be the future for many baby boomers?
Wednesday, October 17th, 2007How might Nicaragua real estate benefit from a generation of retirees? That discussion begins with an analysis of the U.S. market. Real estate is cyclical, though the U.S. has experienced extended periods of positive price appreciation. Taking any 10 to 20 year period, the U.S. home price indexes will look a lot like a stock market chart for the same duration. The trend has been for price appreciation over the long term.
In the period from around 2005 through 2015, there will be a huge number of baby boomers ending their primary careers and looking for their dream retirement situation and location. The financial abilities of this group will be quite diverse, with many finding it necessary to continue in some form of income-producing capacity while attempting to eke out some enjoyment in their later years.
The boomer generation is generally more ambitious than their parents. With high prices for homes in the desirable retirement areas of the U.S., and the surge in demand within a relatively short time span, where might this group find the quality of life they desire in their retirement? Could Nicaragua real estate benefit? What factors might influence their decisions?
- Many will still need a source of income not provided by their investments and savings.
- This group wants to stay involved in life and most will want a second career or meaningful activity.
- Entrepreneurial aspirations are high on the list of many who worked for someone else their entire careers.
- This group has traveled more extensively than their parents.
REITs, or Real Estate Investment Trusts, have gained in portfolio exposure starting around 1999. The CIOs, Chief Investment Officers, of these trusts are looking more at investments outside the borders of the U.S. In the late 90’s through 2006 or so, the hot areas for investment were Europe and Asia. South America lagged behind significantly. However with more stability and infrastructure, it’s now a target for some of the larger REITs. They see a growth potential, and a part of that is the construction of shopping malls, hotels and business complexes to support the growth of a more affluent population. Does that sound like Boomer retirees? What might attract this group to real estate in Nicaragua?
- A stable democratic government well-past previous unrest
- Laws that put foreign property ownership on par with local rights
- Most property owned fee-simple with title insurance available
- Tax incentives for foreign investment and relocation
- Excellent tax incentives for those starting a business
- Homes and land still priced attractively, not yet fully discovered
- Word is getting out about the beauty, lifestyle and economic benefits
“Real estate is local” is the mantra of the industry. That’s very true in many respects. However, when it comes to deciding where one will spend their “golden years”, it’s important to think globally in today’s world. Will Nicaragua real estate be a focus for Boomer retirees? There certainly are a number of very good reasons for a close look.
Article by Jim Kimmons, a Taos real estate broker and internet freelance writer.
